Vertical integration and non‐linear price adjustments: The Spanish poultry sector

Abstract

Abstract The analysis of asymmetries in the price‐transmission mechanism at different levels of the marketing chain provides a good indicator of market efficiency in vertically related markets. The objective of this paper is to investigate the non‐linear adjustments of prices in the poultry marketing chain in Spain. The methodology used is based on the multivariate approach to specify and estimate a threshold autoregressive model. Price relationships at feed industry, producer, and retail levels are considered. Results indicate that, in the long run, price transmission is perfect and any supply or demand shocks are fully transmitted to all prices in the system. In the short run, price adjustments between the feed and the farmer levels are fairly symmetric and are representative of a cost‐push transmission mechanism. On the other hand, retailers benefit from any shock, whether positive or negative, that affects supply or demand conditions when price spreads are increasing, while price behavior is closely related to competitive markets when faced with declining price spreads. [EconLit citations: C320, Q130.] © 2005 Wiley Periodicals, Inc. Agribusiness 21: 253–271, 2005.